Tuesday, 23 June 2015

Billy's Forty-Ninth Law: Use your professionals wisely!

“The minute you read something that you can't understand, you can almost be sure that it was drawn up by a lawyer.”
Will Rogers
Accountants are the pathologists of business.  They can tell what wrong six months after the business died!
Bill Erichson
Over the years, I have worked with hundreds of business people and I have found an important truth… business is too complex to run without professional advice.  A well run business has three key advisors:  a lawyer, an accountant and a business advisor.  The trick is how to use the advisors in order to help you run a sustainable, successful business.

The Business Advisor

Businesses need good business advice.  This is what I do for my clients.  In general, business advisors help the business owner see the big picture, mentor the owner and keep an eye out for the pitfalls that often lead a business down a dangerous path.  Some business advisors are technical specialists and focus on particular industries.  Others are business specialists, usually concentrating in on are such as marketing or finance.  A good business advisor helps you make decisions that make good business sense!  This is a critical factor when making decisions.  The advisor helps you look at things from different sides, and often looks at unforeseen risks and unintended consequences.   

The Accountant

Businesses need good accountants. Accountants, recent advertising notwithstanding address financial issues, especially around the preparation of financial statements and tax returns and around providing solid financial advice.  Many business owners simply use their accountants as tax strategists, and in truth, many accountants look at business through a ‘tax lens’.  Unfortunately, many accountants are not as expert as explaining things as they are doing things.  As one client once told me, “Five minutes into my meeting with my accountant and all I see are dancing cows.”  Accountants are essential, not only for taxes, but for helping entrepreneurs make good financial and tax decisions.

The Lawyer

Lawyer jokes notwithstanding, it is imperative to get good legal advice.  Contracts are tricky, whether we are talking about a lease, loan agreement or sales contract; all of these are contracts and are written by lawyers for judges!  They are often incomprehensible to normal people, but the language of contracts is important.  This way, the intent of the agreement between two parties is reflected in the legal agreement just in case anything goes wrong and the contract goes to court or to arbitration.  Lawyers look at your business through the legal lens just as accountants often look at the business through the tax lens.  A good lawyer is an essential part of any business.
So, what is the problem?  The problem is how many business owners use their advisors.  I have a rule.  See your business advisor first…your accountant second and your lawyer third.  The reasoning is simple.  If a decision does not make good business-sense then don’t do it.  (I am always amazed that people make decisions to spend money because they can “write it off”.  Remember, you have to write it on before you can write it off!) 
If a decision makes good business sense, then meet with your accountant so you can structure the decision to ensure it makes good financial and tax advice.  This can include buy vs. lease decisions, to structuring contracts for tax purposes.  If a decision does not make financial advice, then again, don’t proceed!
Finally, if the decision meets the first two criteria, then see your lawyer.  Ensure that the decision makes good legal advice and that you structure it correctly.  Lawyers often see the differences between an agreement, as you understand it, and the contract as written.  This is far cheaper than trying to enforce something not found in the contract, but something you are sure should have been there.
You need all three pieces of advice.  For example, if you decide to incorporate, it should make good business sense, tax sense and legal sense, and the legal agreement and shareholders agreement must reflect the intent of those involved.  A shareholders agreement is developed to protect both the shareholders and the corporation from the future disputes that will inevitably arrive.  
So use those advisors.  In my experience, they are on your side and are advocates and allies in your enterprise.  Find good advisors and then trust the advice you receive.  It will save you from harm, and help you build the kind of foundation to build a successful and sustainable enterprise.

Monday, 1 June 2015

Billy’s Forty-eighth Law: Find your gift

Believe in yourself! Have faith in your abilities! Without a humble but reasonable confidence in your own powers, you cannot be successful or happy.
Norman Vincent Peale
Many, if not all, of the successful entrepreneurs I have met have a ‘special gift’. This is not exclusive to entrepreneurs, but it is somehow different.  This thought came to me as I spoke to a businessman about his relationship with his children.  I tried to involve my son in the business, he told me, but he got to a point where he thought he knew everything. He second-guessed my decisions, and frankly, he was wrong a lot.  Not only did leave the family business, but also then went to work with the competition.  The son did not understand or appreciate his father's gift, and how important it was to the business.  (His gift was having the ability to see if a piece of equipment would work in a specific situation.) 
I am fourth generation self-employed.  Each of us (all William Erichson by the way) started different businesses.  My Great-grandfather was a blacksmith…my Grandfather & Great-Uncle were farmers…my dad was an electrical engineer who ran his own company until he passed away.  Each had a gift.  My great-uncle was an inventor.  He would use the blacksmithing tools and build his own farm implements.  This made their farm more productive.  My dad had the knack of getting right to the heart of a problem and doing it quickly. 

Some of the other entrepreneurial gifts I have encountered in my journeys include:

Problem Solvers:  I know a fellow who solves production problems in a manner most trained engineers would envy.  His solutions are quick, elegant and usually inexpensive to implement. 

Networkers:  A good friend of mine knows how to put people together.  She is sort of like a business matchmaker.  All you have to do is say, Barb…do you know anyone who can… and there is someone in her network who has the necessary skill set.

Influencers: We all know these people.  They not only know things, but they have the ability to mobilise and convince others.  They bring great sales and marketing skills to their enterprises and influence the buying decisions of others. 

Futurists: A business partner of mine has an uncanny knack of seeing trends.  He capitalised on medical billing and electronic tax returns in the ‘pre-internet’ days, using modems to communicate directly to mainframe computers. 

Implementers: This ‘breed’ of super organized people get things done in spite of the difficulties surrounding them.  They have clarity of both goal and task.  These people can both ‘herd cats’ and ‘nail Jell-O to the wall” to mix two metaphors. 

People Masters:  These people are ‘Human Resources Savants.’  They break all of the traditional rules of recruiting and management, except one,…they get great results!
There are many more, and many of you can think of other people whom you know and other gifts your network possesses. But gifts are often these intuitive, talents that are almost inexplicable. Herein lies the problem.  People with a gift often do not know how to pass it on.  They don’t think…they just do. 

My father thought that his way of getting to the important aspect of an engineering problem was obvious.  In fact, he got frustrated with anyone who could not do the same.  I have met instinctive sales people who make terrible sales managers. I met one woman who was a recruiting savant.  Her techniques were non-transferable to anybody else, but she rarely made recruiting mistakes, and when she did, she said that she didn’t use her instincts.

The gift is a blessing and a curse.  They are great to have, but a business dependant of the gift of the founder may remain dependent on that founder. This makes scalability and sustainability difficult.  For those of you who are gifted try to understand the following:
  1. Not everybody has the gift.  They reach the same destination using a more formal process. 
  2. Try to de-construct your gift.  This is the only way you can pass on your instinct to others. 
So find your gift, use your gift, it is a competitive advantage there for the taking!  Like any gift, it is best not squandered.
Sorry for the late posting however; I have just written and delivered a three-part personal finance program here in Whistler.  This took up a great deal of my writing time.